Pentair Reports First Quarter 2017 Results

May 03, 2017

First quarter sales of $1.2 billion.

First quarter GAAP EPS of $0.44 and adjusted EPS of $0.65.

Net cash used for operating activities of continuing operations of $89 million and free cash flow usage from continuing operations of $112 million. The company expects to deliver full year free cash flow of 100 percent of adjusted net income.

The company updates its 2017 GAAP EPS guidance to a range of $2.95 to $3.05 and maintains its adjusted EPS range of $3.45 to $3.55.

Pentair previously announced that it entered into a Share Purchase Agreement to sell its Valves & Controls business to Emerson Electric Co. for a purchase price of $3.15 billion in cash, subject to certain customary adjustments. The results of the Valves & Controls business, which was previously disclosed as a stand-alone reporting segment, have been presented as discontinued operations for all periods presented.

Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables.

LONDON, United Kingdom — April 25, 2017— Pentair plc (NYSE: PNR) today announced first quarter 2017 sales of $1.2 billion. Sales were down 1 percent compared to sales for the same period last year. Excluding currency translation and acquisitions, core sales declined 1 percent in the first quarter. First quarter 2017 earnings per diluted share from continuing operations ("EPS") were $0.44 compared to $0.50 in the first quarter of 2016. On an adjusted basis, the company reported EPS of $0.65 compared to $0.61 in the first quarter of 2016. Segment income, adjusted net income, free cash flow, and adjusted EPS are described in the attached schedules.

First quarter 2017 operating income was $138 million, down 9 percent compared to operating income for first quarter of 2016, and return on sales ("ROS") was 11.7 percent, a decrease of 110 basis points when compared to the first quarter of 2016. On an adjusted basis, the company reported segment income of $184 million for the first quarter, up 3 percent compared to segment income for the first quarter of 2016, and ROS was 15.5 percent, an increase of 50 basis points when compared to the first quarter of 2016.

Net cash used for operating activities of continuing operations was $89 million and free cash flow usage from continuing operations was $112 million for the quarter. The company expects to deliver full year free cash flow of 100 percent of adjusted net income.

Pentair paid dividends of $0.345 per share in the first quarter of 2017. Pentair previously announced on December 8, 2016 that its Board of Directors approved a 3 percent increase in the company's regular annual cash dividend rate for 2017 to $1.38 from $1.34. 2017 marks the 41st consecutive year that Pentair has increased its dividend.

"We had a solid start to 2017 as both of our segments delivered ahead of their commitments and our adjusted EPS exceeded our prior guidance," said Randall J. Hogan, Pentair Chairman and Chief Executive Officer. "While we continue to feel good about the progress we are making on our productivity actions, we will monitor the important second quarter to see if the sales momentum experienced in the first quarter is sustainable. We expect the previously announced sale of our Valves & Controls business to close in the coming days at which point we will gain balance sheet optionality, and of course, we will be disciplined in our capital allocation strategy. Finally, we are even more confident that we can deliver double-digit adjusted EPS growth for the full year."

OUTLOOK

The company updates its 2017 GAAP EPS to a range of $2.95 to $3.05 and maintains its adjusted EPS range of $3.45 to $3.55 and anticipates full year 2017 sales of $4.8 billion, or down approximately 2 percent on a reported and core basis. The company expects to deliver full year free cash flow of approximately 100 percent of adjusted net income.

In addition, the company introduces second quarter 2017 GAAP EPS guidance range of $0.87 to $0.89 and, on an adjusted EPS basis, a range of $0.97 to $0.99, up approximately 11% on an adjusted EPS basis versus the same quarter last year. The company expects second quarter revenue to be approximately $1.24 billion, which would be down approximately 5 percent on a reported basis and down approximately 4 percent on a core basis compared to second quarter 2016 revenue.

EARNINGS CONFERENCE CALL

Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company's performance, first quarter 2017 results on a two-way conference call with investors at 8:00 a.m. Eastern today. A live audio webcast of the call, along with the related presentation, can be accessed in the Investors section of the company's website, www.pentair.com, shortly before the call begins. Reconciliations of non-GAAP financial measures are set forth in the attachments to this release and in the presentation, both of which can be found on Pentair's website. The webcast and presentation will be archived at the company's website following the conclusion of the event.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "should," "would," "positioned," "strategy," "future" or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the company’s ability to complete the sale of the Valves & Controls business on anticipated terms and timetable; overall global economic and business conditions, including worldwide demand for oil and gas; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions; competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including in our 2016 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this report. We assume no obligation, and disclaim any obligation, to update the information contained in this report.

ABOUT PENTAIR PLC

Pentair plc (NYSE: PNR) is a global company dedicated to building a safer, more sustainable world. Pentair delivers industry leading products, services and solutions that help people make the best use of the resources they rely on most. Its technology moves the world forward by ensuring that water is plentiful, useful and pure, and that critical equipment and those near it are protected. With 2016 revenues of $4.9 billion, Pentair employs approximately 19,000 people worldwide. To learn more, visit pentair.com.